Achillion: A Compelling 'Buy' Candidate Now

Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

There are numerous biotech stocks out there and the key to smart investing is finding one that is a good value. This might not be the cheapest available and it might not be the overall best, but it will be a solid earner for the money you invest. What I always tell investors searching for a good value is to find mid-price companies with strong pipelines. In general, avoid companies focused on only one or two drugs and avoid companies that are selling for more than $35 to $40 per share. Though companies this high can be steady earners, you are unlikely to see a big bang any time in the near future. They are reliable, but there are better values out there to find.

One of my favorite deep value plays is Achillion (NASDAQ: ACHN). Achillion is a biopharmaceutical company that develops treatment for infectious disease.  One of the things I like best about Achillion is its focus on what are likely to be huge markets in the future-- i.e., developing Asia and Africa, and its strong pipeline. The company is developing three clinical candidates for the treatment of chronic hepatitis C infection. First, is ACH-1625, a proprietary potent, once-daily NS3 protease inhibitor currently in Phase II clinical development. Second, the company is evaluating in Phase 1 ACH-2684, a highly potent, pan-genotypic inhibitor of HCV NS3 protease with pico-molar potency. Finally, Achillion is advancing the first candidate from its NS5A program ACH-2928, a pico-molar potent inhibitor of HCV NS5A that demonstrates pan-genotypic activity. The company also has a portfolio of antibacterial drug candidates for the treatment of serious, resistant bacterial infections. Each of these programs was discovered through Achillion's own proprietary internal discovery efforts.

In February, Achillion saw a jump after one of its main competitors, Gilead Sciences released disappointing study results for its own hepatitis C treatment. The drug was part of the class nucleotides, while Achillion's leading hepatitis C treatment is a protease inhibitor. Prior to the study results, some experts anticipated the nucleotides would be more effective than the protease inhibitors. Vertex, another of my favorite stocks, though not in the value category, also saw a jump following the study results.

Also in February, Achillion announced an important executive promotion. The company promoted Joseph Truitt to Senior Vice President of Business Development. He was previously the Vice President of Business Development and will also maintain his position as Chief Commercial Officer. Truitt has been with Achillion since 2009 and has been a part of several strategic projects. Truitt is expected to drive the business development and marketing efforts of the company, keeping it on track to surpass $20 billion in earnings by 2020. There was little initial activity in response to Truitt's promotion, but the move shows the company is strong, confident, and looking toward the future.

Achillion is not the only company in this price range I think is a great value investment. Spectrum Pharmaceuticals is currently selling for around $11. Its focus is on cancer research and development, and it currently has two drugs on the market, as well as several in the pipeline. Companies focused on cancer research, especially those who have several drugs in the works, are great investments in my opinion. It is a broad market and there is a lot of cross treatment with drugs. If a particular study is unsuccessful, drugs are often tested for other uses. The same happens for drugs that are successful, too.

Another company on my list is Human Genome Sciences (NASDAQ: HGSI). The current price is around $8. HGSI is the maker of Benlysta, which is a lupus treatment. There are also several drugs in the pipeline and the company has a relationship with GlaxoSmithKline. This means it stands to benefit financially from GlaxoSmithKline developments. Though a lupus treatment is not something on which to bet the farm, I still think it is a great value at its current price.

Dendreon (NASDAQ: DNDN) is still a great value, even at $11. The company is focused on cancer treatment and research, and despite a few rough patches is still doing fairly well. There was a time when Dendreon was one of the most-watched stocks in the biotech industry, but it has cooled off quite a bit in the last few months. For some, this is a sign to jump ship, but I think it makes it the perfect time to buy. I am confident the price is going to rise and if you can get in low around $10, you are going to be in great shape in a few months.

Of all of these value stocks, I believe Achillion is the best, but I would be willing to bet on any of them. In addition to a strong pipeline and a value price, also consider the focus of the company's research. Companies focusing on treatments for problems that will be health crises in the future will be better earners than others. For example, though HGSI is a strong company, I would pick a company focused on cancer research or diabetes before one with a focus on lupus. The larger part of the overall market a drug can target, the more successful it will be.


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